Asked by Julianne Marie on May 07, 2024
Verified
A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.
Current Ratio
A financial ratio indicating a firm's capacity to settle short-term liabilities with assets due within the same period.
Marketable Securities
Financial instruments and assets that can easily be converted into cash, often traded on public markets.
- Pinpoint and interpret the significance of assorted financial ratios in gauging a firm's financial stability.
- Comprehend the notion of working capital and its critical role in short-term financial analysis.
Verified Answer
CH
Callie HentschMay 14, 2024
Final Answer :
True
Explanation :
The current assets total $562,500 ($75,000 + $115,000 + $150,000 + $222,500). The current ratio is calculated by dividing current assets by current liabilities, which results in 2.5 ($562,500/$225,000 = 2.5).
Learning Objectives
- Pinpoint and interpret the significance of assorted financial ratios in gauging a firm's financial stability.
- Comprehend the notion of working capital and its critical role in short-term financial analysis.
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